Our latest recommendation takes you to one of this year's top-performing stock markets in the world, India. And it does so through Mumbai-based HDFC Bank Ltd. (HDB), one of India's largest and most successful banks.
Here's why I think HDB should do particularly well during the next six to eight weeks as we head into 2013.
First, as you know, emerging markets go in and out of fashion. And it looks like after a period of being in the doghouse, India is back �in.�
Investment bank Goldman Sachs upgraded its outlook for Indian stocks, forecasting 7.2% economic growth during the next year in fiscal 2014, up from an expected 5.4% pace in the current fiscal year that ends in March.
The upgrade comes after news that, after a period of backtracking, India has loosened restrictions on foreign investment in sectors such as finance, retail and aviation.
That situation means India could once again become one of the more exciting destinations for investors in emerging markets over the next few years.
Second, HDB is the single-best way to profit from this turnaround in investor sentiment toward India. With its earnings growth averaging just 20% over the past three quarters, HDB's fundamentals are strong.
The company�s fiscal second quarter earnings per share of INR6.50 (36 cents per ADR) topped the year-ago earnings by 27.5%.
HDB also has a trailing 12-month return on equity (ROE) of 17.4%, compared with the peer group average of 11.4%, confirming that it reinvests its earnings more efficiently than its banking peers.
And with a long-term growth projection of 30.0% per year, its current price/earnings to growth (PEG) ratio comes in at 0.82 -- an 18.0% discount to the benchmark of 1 for a fairly priced stock.
Finally, December and January tend to be the strongest time of the year for emerging markets stocks. This, combined with Goldman Sachs' recent �blessing� of India, means that a lot more institutional money will be flowing into India as part of a year-end portfolio re-balancing.
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